“Vote blue, go green” was the slogan with which David Cameron rebranded his Conservative party for the 21st century. He was the first Tory leader for many years to show a personal enthusiasm for tackling climate change.

When the Tories entered coalition with the environmentally minded Liberal Democrats, there were high hopes that blue plus yellow would equal green.

However, concerns that the government is in retreat from that agenda will be reinforced by Financial Times revelations of deep cuts to subsidies for household solar panels.

“FITs [feed-in tariffs] have made a significant contribution to the green economy of 25,000 jobs,” said Daniel Green, chief executive of the HomeSun solar supplier. “If the government decides to reduce funding, the payback will become so low that only the very rich with a spare £10k and an eco-conscience will be able to afford solar.”

Fears of a cut are already denting investor confidence, according to Bruce Davis, retail director of Abundance, a community investment company. “We know of several community initiatives across the UK who were considering using the generation of renewable energy …and who are now either stopping development or considering pulling out altogether,” he said.

Chart: Solar panel demand has soared under generous subsidies

Ministers can still point to several environmental “triumphs” – not least the pledge to set up a Green Investment Bank to lend to the sector. They have also committed Britain to tough carbon reduction targets.

Elsewhere, their green credentials are fading fast. In his March Budget, George Osborne promised to introduce a “carbon floor price” giving investors greater certainty on renewables. Yet the chancellor is now drawing up measures to alleviate the impact on energy-intensive industries.

During the Tory conference, he also boasted that he had insisted on an opt-out clause for carbon reduction targets. If, by 2014, the European Union was not hitting its own carbon targets, Britain would be free from any obligation to reach its own “carbon budgets”, he said to applause.

And on the Green Investment Bank, critics believe that the Treasury – by insisting the bank will not be able to borrow until the UK debt mountain is falling – has hobbled its potential for several years.

Mr Osborne’s other setpiece green announcement in the Budget – that £1bn would be set aside for a pioneering carbon capture and storage (CCS) scheme – suffered a blow on Wednesday as the Scottish demonstration project was officially cancelled. Its backers, Scottish Power, had said they needed an extra £500m to build the Longannet plant.

The government said it would use the £1bn “for a new process”, understood to include gas-fired power stations, and it anticipated several fresh bids.

David Clarke, chief executive of the Energy Technologies Institute, whose members include BP, Shell and Rolls-Royce, said the news was disappointing and “highlights the urgency of finding lower-cost and practical solutions to developing new CCS infrastructure”.

WWF, the environmental campaign group, said Longannet’s scrapping came at a worrying time when the government was sending mixed messages on its climate-change commitments.

Meanwhile, details will be published on Thursday of the ROC (renewable obligations certificates) system for 2014-17.

Onshore wind, Britain’s biggest source of renewable energy, will see a slight cut from its current subsidy level of one ROC per megawatt hour of electricity produced. Offshore wind will remain at two ROCs, while the fledgling wave and tidal industry will see its subsidy rise from two ROCs. The Department of Energy and Climate Change also plans to provide more certainty on biomass subsidies.

Overall, this should allow more generation of renew­ables, said one coalition source. “At the moment, generators get money for the electricity they sell and also money through the ROCs. As electricity prices go up and costs are going down, some companies are making excess profits.”

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